5. Conclusion
There is evidence that suggests that expenditures on the maintenance and repair of physical capital. However, with regard to indeterminacy properties, very few papers consider such expenditures in their artificial economies. Hence, I am interested in what changes it can make to dynamic properties of an artificial economy once maintenance expenditures are considered. In this model, capital depreciation is dependent on capital utilization and maintenance expenditure. I conclude that maintenance expenditures are instrumental in generating multiple equilibria: It can make indeterminacy occur under relatively milder degree of externalities compared with its model predecessors as maintenance activities offset the capital depreciation and boost the net rate of return on capital. It has been an issue that a model incorporating both two-sector production and variable capital utilization rate will induce extremely narrow range of increasing returns. It is difficult to replicate the procyclical consumption behaviour. Therefore, I also present an alternative model where capital utilization rate is constant over time. The result that indeterminacy requires lower degree of externalities in a model with maintenance activities than a model without it is robust. Under this formation, the countercyclical consumption puzzle is solved and most features of the model moments are comparable to the U.S. data. Understanding the importance of maintenance expenditures on multiple equilibria could have implications for policymakers to improve economic welfare. As an important part of economic activity, the maintenance expenditures should be taken into account in the formation of economic policy such as interest rates which are often reckoned as agents' confidence indicator.
